Nothing is certain except death, taxes and the Coalition’s inability to reform
the economy – or so my lunch guest, a Tory backbencher and former Cameroon
loyalist, assured me.

He was exaggerating, but only slightly: the past two-and-a-half years have been bitterly disappointing for anybody hoping for a supply-side revolution, or even just some progress on airport expansion.

I’m a little more optimistic about the year ahead. In several key areas, including monetary policy and Europe, events and public opinion have upped the chances of change. There are at least five battles reforming forces could win or at least strongly influence next year; all matter hugely to this country’s future and must be waged vigorously.

The first will begin even before Mark Carney, the Bank of England’s new Governor, steps into Threadneedle Street, and will be about the future of Britain’s monetary policy. The current system, devised by Gordon Brown and Ed Balls, seeks to limit the annual increase in the consumer price index (CPI) to 2pc, within a one percentage point band. It neither stopped the bubble nor restrained inflation, with prices constantly ahead of target and nobody held to account. This central plank of Brownonomics must be given its last rites; the Government finally appears ready to contemplate change.

Carney himself has floated adopting a version of nominal GDP targeting instead, under which growth and inflation are both taken into account when setting interest rates and engaging in quantitative easing or tightening. There are a number of problems with most such plans. When misused, they can turn into an inflationista’s charter, with the Bank effectively given the green light to let prices rip, under the cover of strange concepts the public cannot understand and cheered on by those with large amounts of debt, while ruining savers and pensioners.

There is, fortunately, a solution that is a better variant of Carney’s idea: the Bank should adopt a “productivity norm” - a plan that would force the Monetary Policy Committee to target the growth rate of nominal GDP to ensure that average prices would fall as the economy becomes more efficient and would only rise when productivity is falling (such as during a financial crisis, or an oil shock). The best advocate of this idea is George Selgin, a US academic, who has written about this in the UK context for the Institute of Economic Affairs. His scheme, had it been in place, would have largely prevented the UK bubble. One thing is sure: for the first time since 1997-98, Britain could change its monetary policy next year. It is vital that supporters of sound money make their voice heard.

One war that must end in 2013 is that being waged against the City. The Government needs to stop the bashing, the relentless rewriting of the rules and the endless and contradictory public interventions from regulators keen to promote their latest “crackdown” – and allow London’s bankers, accountants, lawyers and wealth managers to get on with it. The latest such voice in Britain’s deafening policy cacophony is that of the Parliamentary Banking Commission.

When Carney takes over, he and George Osborne need to strike a deal – and usher in a new period of stability and clarity in financial regulation. The aim must be to eliminate moral hazard, and prosecute any illegal behaviour, but also to allow the growth and success of the City. There will have to be no more commissions, and no more dissent and morally vacuous grandstanding within the regulatory ranks. This reduction in the mindless chatter will also force Labour to become more grown-up about the City and ditch its insane plans to tax it to death. Without the City’s exports, we could never even begin to pay for imported goods; without the City’s tax receipts, our catastrophic public finances would become unsustainable. Osborne knows this, as does Carney, so mild optimism is in order.

The next big battle will be over Europe. David Cameron hoped he would never have to deliver his long-awaited speech, due for January, but it is a once-in-a-generation chance to acknowledge that the relationship between the UK and Brussels is unsatisfactory for all concerned – especially when the eurozone is turning itself into a union within a union – and unite the vast majority of his party around a robust, radical new vision of a self-governing, free-trading global nation. Cameron’s plan needs to involve a substantial repatriation of powers to the UK; it needs to be realistic; it needs to be economically sound, with the UK’s only residual interest in the EU being about the promotion of trade; and it needs to be credible, with the threat of withdrawal if negotiations fail.

But there is a dual challenge here. Business wants to preserve free trade and the free movement of people and is nervous of loosening Britain’s ties with the EU – so it needs to be shown that the status quo is neither optimal nor the only option to ensure UK prosperity. The EU’s takeover of financial regulation is merely the latest ticking time bomb. It would be a disaster were most big firms to align themselves against the Prime Minister on this, against public opinion and with Ed Miliband. So the PM needs a new policy and approach – and he needs to reach out to business.

Another key battle for 2013 is to ensure far more homes start being built in the right places with the right infrastructure – and I’m not just thinking of a few rabbit-hutches on the margins of some industrial estate. The biggest problem facing millions – including many who already own a home, as well as the growing minority who don’t – is cramped, antiquated and prohibitively expensive living conditions. This long-overdue reform has a greater chance of happening than at any time for years. It can unite left and right and be used to show that the Coalition cares about the aspirational classes’ quality of life.

Last but not least, the Conservative party needs to realise it has reached an intellectual and practical dead-end. It faces catastrophe, with votes peeling off to UKIP and Labour. It needs to find a fresh, uplifting and optimistic message, centred on the case for smaller government and tax, welfare, regulatory and public sector reform as a means of kick-starting growth and spreading opportunity. The work needs to start now, especially if the Coalition collapses early. For too long, free-marketeers have been marginalised within the Tory party; but, given the state of the economy and of the polls, they have a unique opportunity to demonstrate the renewed relevance of their ideas.

The best that can be said about 2012 is that it could have been even worse. I may have allowed the seasonal good cheer to warp my better judgment, but by comparison I’m feeling almost upbeat about 2013.